August 6, 1999
Amid Stock Market Uncertainty,
Eight Companies Postpone IPOs
By MICHAEL WHITE
Associated Press
LOS ANGELES -- An outbreak of cold feet swept through the market for
initial public offerings Friday as eight of 11 companies poised to go public
postponed their debuts -- a sign that the IPO market may have stalled again.
Friday's calendar of offerings on the Nasdaq
Stock Market was pared down after a week of
sharp swings in investor enthusiasm for a
market dominated by Internet companies. The
three companies that went through with IPOs had a lackluster reception
Friday.
Those that withdrew, including Women.com Networks (www.women.com) of
San Mateo, Calif., and the floral delivery service FTD.com (www.ftd.com),
were scared off by the volatility of recent responses to Internet-related IPOs,
analysts said.
"Those companies planning to go public today are kind of traumatized by
what's happened this week," said Jay Ritter, a University of Florida finance
professor who specializes in IPOs. "The IPO market, whether we're dealing
with the Internet or any industry, has always been sensitive to market
movements, and Internet stocks are sensitive to extremes."
Enthusiasm for Internet IPOs appeared to revive on Thursday when Internet
Capital Group, a Wayne, Pa., holding company with investments in 35
Internet businesses, more than doubled its offering price on the first day of
trading. Two other Web-related IPOs also performed well, but another two
got a cold shoulder from investors.
That followed a disastrous run on Tuesday in which all three companies going
public fell below their offering prices. Four more companies met the same
fate on Wednesday.
The IPO retreat follows a long slide in Internet stocks. The 40-stock Dow
Jones Internet Index has shed half of its value since it hit an all-time high on
April 13.
Plans for Friday IPOs also were unsettled by fears that new economic data
released before the start of trading would push markets down again, said
Corey Ostman of Ostman's Alert IPO, a Santa Monica, Calif., company that
has tracked the IPO market since 1996.
A strong government employment report Friday, including signs that wage
pressure was intensifying, did raise worries that the Federal Reserve would
seek to launch another strike against inflation by pushing up interest rates. The
Dow Jones industrial average fell 79.79 points, erasing more than half of its
Thursday gain of 119.05.
The technology-heavy Nasdaq composite index also fell Friday and now is
down 11% since reaching a record 2,864.48 just three weeks ago.
The companies that postponed indicated they would try again next week, Mr.
Ostman said. The three companies that went forward with their IPOs on
Friday got a tepid response.
Internet Gold, Israel's leading Internet service provider, was sold to investors
at $12 a share but wound up its first day of trading at $11.93 3/4 on Nasdaq.
Datalink Corp., a Minneapolis-based builder of data storage devices, which
was initially offered at $7.50 a share, closed at $7.68 3/4 on Nasdaq.
Tumbleweed Communications of Redwood City, Calif., was launched at $12 a
share and closed at $12.06 1/4 on Nasdaq. The company creates secure e-mail
systems for corporations and government agencies.
That compares to spectacular openings that became almost routine during
much of 1998 and early 1999. In this year's second quarter, a few companies
have struck gold, but the number has dwindled.
Ariba Inc., a Sunnyvale, Calif., company that helps businesses track sales over
the Internet, had the quarter's best opening. Ariba rose 291% from an
offering price of $23 to $90 on June 23.
EToys Inc. (www.etoys.com) of Santa Monica, Calif., jumped 283% from $20
to $76.56 1/4 on May 20.
The quarter's worst performance came on June 18, when Steamline.com, a
Massachusetts company that allows consumers to use the Internet to have
products like food and firewood delivered to their homes, closed 24% off its
offering price of $10.
One problem, said Mr. Ostman, is that many new investors who have tried to
ride the IPO boom have expected too much.
"People got used to the idea of doubling or tripling at the opening," said Mr.
Ostman. "Historically the pop has been 10 to 20%. People have forgotten
about that."
The seesaw reaction makes it impossible to tell if the IPO boom is dead or in a
cycle of fluctuations, said Ivo Welch, a University of California, Los Angeles,
finance professor who tracks the IPO market.
"It's very difficult to predict where the Internet stocks are going to be three
months for now. If they come back we'll see a lot of Internet IPOs," he said. |
